Hong Kong Stocks Drop to Three-Month Low as Property Firms Sink

  • Developers decline amid concern Fed to speed up rate increases
  • Mainland shares advance as economy shows signs of stability

Hong Kong stocks declined, dragging the benchmark index to a three-month low, as property companies tumbled amid concern borrowing costs will rise.

The Hang Seng Index lost 1.4 percent to close at its lowest level since Aug. 5. A gauge of real estate companies traded in the city extended their worst week in four years amid speculation a faster pace of U.S. interest-rate hikes under Donald Trump and higher taxes will curb demand for housing. The Shanghai Composite Index gained 0.5 percent to extend a bull market rally.

While stocks in Hong Kong have slumped almost 8 percent from their September high as Trump’s unexpected victory last week roiled markets, mainland equities -- which are less exposed to global events -- have climbed to their highest level since January. Data showing China’s economy held ground last month, with industrial production climbing 6.1 percent from a year earlier, added to support for Shanghai shares.

"The liquidity problem has been weighing on Hong Kong stocks as the possibility of an interest-rate increase next month is increasing," said Cliff Zhao, a Hong Kong-based strategist at China Merchants Securities Co.

The Hang Seng Index slid to 22,222.22. The Hang Seng China Enterprises Index retreated 1 percent. The Shanghai Composite’s 14-day relative strength index climbed to 71, above the 70 level that signals to some traders that shares are overbought.

Shanghai shares are narrowing the performance gap with their Hong Kong-listed counterparts after trailing behind for much of the year. Rallies in commodity producers have boosted Shanghai’s benchmark, while declines in financial companies have weighed on the H-share gauge.

The Hang Seng Properties Index retreated 2.4 percent to its lowest close since July 8. China Resources Land lost 2.2 percent. Wharf Holdings Ltd. and Sun Hung Kai Properties Ltd. slumped 2 percent. Cheung Kong Property Holdings Ltd. fell for a second day.

Tencent Holdings Ltd. retreated more than 3.7 percent for a second day to close at its lowest price since Aug. 15. The company is due to report three-month results on Wednesday.

Pacific Investment Management Co. said the Fed may raise borrowing costs three times by the end of 2017, while futures traders see an 84 percent chance of a hike at the U.S. central bank’s December policy meeting. A currency peg to the greenback means Hong Kong follows American monetary policy.

China Petroleum & Chemical Corp., better known as Sinopec, sank 1.7 percent. Oil held losses near the lowest close in seven weeks as Iran boosted output and U.S. explorers raised the number of active rigs to the most since February, signaling the persistence of a global supply glut.

China’s October industrial output just missed the median estimate of 6.2 percent in a Bloomberg survey, while retail sales slowed to 10 percent, compared with the median forecast of 10.7 percent. Fixed-asset investment rose 8.3 percent in the first 10 months of the year. Aggregate financing decreased to 896.3 billion yuan ($131 billion) last month, the central bank said Friday after the market closed. That compared with the median estimate of 1 trillion yuan in a Bloomberg survey and 1.72 trillion yuan the prior month.

Brokerages were among the best performers in Shanghai amid speculation an expanded exchange link with Hong Kong will start imminently. Construction-related companies also outperformed.

Changjiang Securities Co. advanced 5.6 percent and Founder Securities Co. gained 5.1 percent. China Railway Erju Co. surged 10 percent.

— With assistance by Shidong Zhang

    Before it's here, it's on the Bloomberg Terminal.